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Bristol-Myers Squibb PATENTS, PROFITS, AND PUBLIC SCRUTINY

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Agenda

Overview of Issues

In the Bristol-Myers Squibb corporate Pledge, the company declares:

We pledge Bristol-Myers Squibb to the highest standard of moral and ethical behavior and to policies and practices that fully embody the responsibility, integrity and decency required of free enterprise if it is to merit and maintain the confidence of our society.

1999-2001 accounting scandal at Bristol-Myers Squibb

Patent protection of Plavix

Plavix is the company’s top-grossing drug: responsible for approximately 30% of BMS revenues. (Second is Pravachol, a widely-applicable anti-cholesterol medication, responsible for 12% of BMS revenues.)

Nascent patent protection agreement with Apotex

Failure of negotiations in August 2006

Department of Justice investigation

History of Bristol-Myers Squibb

“Starting with a dream, a handful of people and a few thousand dollars in capital,” William McLaren Bristol and John Ripley Myers founded the Bristol, Myers company in 1887. The original mission of Bristol-Myers was “to sell quality medicines directly to doctors.”

In the latter half of the 19th century, Dr. Edward Robinson Squibb also launched a pharmaceutical business that carried his name.

Bristol-Myers and Squibb merged in 1989, one of the largest mergers in corporate history. At the time, they formed the world’s second-largest pharmaceutical company.

Financial situation

R&D expenditures in 2005 were $2.7 billion, up 10% from 2004; this included $2.5 billion in payments for in-licensing and development programs. For 1Q2006, $750 million was spent on R&D, up 22% from the previous year.

Bristol-Myers Squibb is determined to be a leader in drug development. Strategies include:

in-house development and collaboration

acquisition of smaller dynamic pharmaceutical companies

divestiture of non-core assets (May 2005 sale of Oncology Therapeutics Network distribution business, and US and Canadian Consumer Medicines business to Novartis).

Forecast I

Forecast for the future is cautiously optimistic:

New BMS blockbuster drugs may spearhead a turnaround. In the first half of 2003 two major drugs were approved: Abilify, an antipsychotic, and Reyataz, the first once-daily protease inhibitor for the treatment of HIV/AIDS. In addition limited clearance was given to Erbitux, the sidelined cancer drug licensed from Imclone. Analysts at SunTrust Robinson Humphrey estimated that Erbitux sales could peak at more than $700 million. The promising drugs signaled a potential new beginning for the company. Morningstar projects an average revenue growth rate of 3 percent through 2007.

However, more generic challengers are entering the market

There is the threat of increased competition from the large drug developers in BMS’s core territories. (Merck, Norvartis, and Pfizer are core competition)

Forecast II

If 1Q 2006 is an indication of a trend, 2006 will be more profitable for BMS: the company reported a 34% increase in first-quarter profit to $714 million, helped by higher sales of heart and blood-pressure drugs and, a $200 million gain from selling off assets.

Revenues were up only 3% to $4.7 billion, (U.S. pharma revenues rose 17% to $2.1 billion).

However, Erbitux sales were $413 million for the year up 58%. Plavix, Abilify, and Reyataz sales were up 15%, 54% and 68% respectively – definitely a bright spot for the company.

A Brief History of Peter Dolan

Education: BA from Tufts University (1978), and MBA from Dartmouth College (1980).

Worked at General Foods from 1983-1987. In 1988, began working at Bristol-Myers as Vice-President of Marketing.

1995-1996: As president of the Mead Johnson Nutritional Group, the company opened manufacturing facilities in four countries and international sales climbed to 40 percent of the corporation's revenue by 1996.

Was famous for setting “Big Hairy Audacious Goals” – like his 2001 promise to double BMS revenues within five years. He would come to regret that statement, as 2002 sales totalled $18.1 billion, down 1% from 2000.

Named CEO in February 2001 and chairman in 2002.

A Brief History of Peter Dolan (cont.)

2001: Heeding calls from Wall Street, quickly jettisons auxiliary businesses —selling Clairol, the number-one hair-color brand and a longtime anchor product, for example — and re-focuses on pharmaceuticals. Negotiates and invests heavily in a $2-billion R&D and marketing deal with ImClone Systems regarding the cancer drug Erbitux, which was subsequently issued a “refusal to file” letter from the FDA . Investor outrage over the fact that Dolan had invested in the partnership without solid reassurance resulted in a write-down of $367 million — most of Bristol's investment in ImClone.

Concern over BMS flagging analyst ratings and crumbling stock price

Board of Directors and analysts express concern as to whether Dolan’s meteoric rise up the corporate ladder had exposed him to enough of the “character-building” experiences that season a CEO and teach him to deal with adversity.

What is Plavix?

Anti-platelet medication approved by the U.S. Food and Drug Administration to reduce the risk:

Heart attack

Stroke

Vascular death in patients with established peripheral arterial disease

When taken daily can help reduce risk of having a future heart attack or stroke